Franchising your business represents an opportunity for massive growth, but the legalities aren’t easy to navigate. Whether you’re an established company seeking strategic expansion or an entrepreneur curious about your options, our franchise lawyers in Denver can help you explore how franchising could work for you.
Call 719-212-2022 today or contact us to schedule an initial consultation.
Franchise Basics and Structure
A franchise is a business method where the owner (franchisor) grants individuals (franchisees) the right to operate a business in exchange for payment from the franchisee. A franchisee can then operate using the franchisor’s brand, products, and processes.
Franchise agreements typically include payment for:
- The franchisor’s trademark
- Training or equipment provided by the franchisor to the franchisee
- Ongoing royalties and a share of profits
Franchisees do not own the business; they operate under the franchisor. They rent the franchisor’s business model, procedures, and intellectual property. Understanding the franchise relationship and the agreement terms are key to a successful franchise system.
How Are Franchises Regulated in Colorado?
In Colorado, there is no state law regulating the franchise relationship. But, franchisors operating in the state must comply with federal law, specifically the Federal Trade Commission (FTC) Rule. Established in 1979, the FTC Rule requires you to provide a detailed Franchise Disclosure Document (FDD) to all potential franchisees in Colorado. The FDD must be transparent and informative about your franchise opportunity, similar to securities disclosure documents.
While Colorado law offers flexibility regarding franchising, other states may have stricter regulations you must comply with if you plan to expand. A franchise lawyer in Denver can explain the regulatory requirements your franchise must meet.
Pros and Cons of Franchising
Franchising allows business owners to expand their brand without shouldering all the operational responsibilities and costs. It offers a proven and replicable system, training support, and marketing assistance.
Like any business, franchising has pros and cons to be considered.
For Franchisors
Franchising allows businesses to expand without directly managing each location or worrying about operational expenses. Franchisors can leverage their existing brand to attract customers in new areas and boost overall revenue through royalties and fees from franchisees. Franchising offers a proven and replicable system with reduced upfront investment.
One of the main drawbacks is that franchisors lose a degree of control since franchisees operate largely autonomously. This can lead to inconsistency across franchise locations that may damage brand reputation. A franchisor’s success also depends on the franchisee’s locations performing well – failed franchises can be costly and open the franchisor up to conflict.
For Franchisees
Franchisees benefit from operating in an established business model backed by a successful brand, which brings the opportunity for strong revenue. They also enjoy access to training programs and ongoing support from the franchisor.
However, a common obstacle for franchisees is high startup costs requiring substantial upfront capital. Franchisees may also be limited in where they can operate by territorial restrictions. They also face other restrictions in agreeing to the franchisor’s guidelines, leaving little room for creative freedom.
Our Franchise Services in Denver
The Lantz Law Group has successfully guided clients on both sides of franchising in the Denver area.
Franchisor Services
If you’re looking to franchise your business, we can help with:
- Business plans, franchise concept creation, and market research.
- Draft and review franchise disclosure documents to ensure compliance.
- Crafting clear and balanced agreements protecting both franchisor and franchisee rights.
- Ongoing guidance on franchisee compliance, training, and dispute resolution.
Franchisee Services
If you plan to purchase franchise rights, we can provide support for matters such as:
- Perform due diligence, analyze franchise opportunities, and assess risk.
- Negotiate for franchisee interests while crafting the agreement.
- Provide support for navigating operational requirements, reporting procedures, and regulatory compliance.
Franchise Law FAQs
Is franchising right for my business?
Not every business is a good fit for franchising. Factors like brand recognition, scalability, and potential investment vs. return should all be considered. A Denver franchise attorney can analyze your business model and help you determine if franchising is viable.
What’s the difference between a franchisor and a franchisee?
A franchisor owns the brand and business system, providing licenses and support to franchisees. Franchisees operate the business under the franchisor’s brand and follow their guidelines in exchange for fees and a share of profits.
How long does it take to set up a franchise?
Starting a franchise involves several steps, such as establishing support systems, creating a comprehensive franchise disclosure document (FDD), and recruiting franchisees. The timeline can vary but typically takes several months. Working with a franchise attorney can guide you through the process, ensure compliance with regulations, and optimize the timeline to get your franchise running faster.
What happens if I have a dispute with my franchisor/franchisee?
Dispute resolution should be outlined in the terms of your franchise agreement. Mediation or arbitration clauses may require resolution through alternative dispute resolution methods before pursuing litigation. Consulting with a franchise attorney is crucial in navigating disputes, understanding legal obligations, and seeking a resolution that aligns with your interests and complies with franchise regulations.
“Eric set up my terms and conditions for my travel agency...
and helped me write up all my contracts. He is communicative, patient, extremely knowledgeable and my go-to attorney for anything my business needs. I highly recommend Lantz Law Group!
Michele Friedmann
Contact a Franchise Lawyer in Denver Today
Franchising could take your business to the next level, but completing all the necessary steps is a big undertaking. Or maybe you have an entrepreneurial dream but don’t want to build a business from scratch. No matter your position or the size of your business, the franchise lawyers at the Lantz Law Group can handle the complexities of franchising on your behalf.
Our team of Colorado business lawyers helps clients in Denver and beyond. We have years of experience in franchise law and franchise-related business transactions.
Call 719-212-2022 today or contact us to discuss how our franchising lawyers can help.